Today, the 1st of July, right in the mid-summer heat, Croatia will become the 28th member of the European Union. It will happen 22 years and just few days after Croatia declared its independence[1] and disintegration of Yugoslavia began bringing to the region war, genocide and ethnic cleansing.

This article will take a brief look at Croatia’s accession process, highlighting its main challenges and reminding of the EU accession conditionality applied towards aspiring countries in the Western Balkans.

Croatia’s path

The relations between Croatia and the EU began developing after Croatia’s international recognition (15 January 1992). However, by the end of 1990s, Croatia was still a state with a nationalist-pattern government that did not always comply with the EU conditions the way it was expected to.[2] It was especially hard to persuade Croatia to cooperate with the International Criminal Tribunal for the former Yugoslavia (ICTY), a United Nations court of law dealing with war crimes that took place during the conflicts in the Balkans in the 1990s.

Hence, once elected in 2000, the moderate government received pressure from the EU to change the line of politics of their predecessors. The EU openly stressed the importance of extraditing war criminals and the need to encourage repatriation of refugees. Croatia started implementing those requests.

Proceeding further, in October 2001, Croatia signed the Stabilization and Association Agreement with the EU and on 21 February 2003 presented its application for membership. The following year in June 2004, the European Council granted Croatia candidate status. Accession negotiations were started only later in October 2005.

Almost six years later, in June 2011, the last four chapters of accession negotiations were closed and in December 2011 the Accession Treaty[3] was signed. After the positive outcome of the referendum in Croatia where 66.27% of voters supported Croatia’s accession to the European Union,[4] the process of ratification of the Accession Treaty by the EU Member States began. Last month, with the German Bundestag ratifying Croatia’s Accession Treaty the process was finalised,[5] opening the door to accession on 1 July 2013.

Cooperation with the ICTY and Croatia’s case

Ensuring that Croatia and other Western Balkan states[6] cooperated with ICTY[7] was part of the international community’s (US, NATO, EU) overall strategy in the Western Balkans. Nevertheless as noted earlier, it was not easy.

For the majority of people living in Croatia, the war was recent, memories were vivid and the indicted war criminals were perceived as respected war heroes who won independence for their countries.[8] Under President Tuđman, cooperation with the ICTY was not supported at all. Only after his death it started being widely discussed and a question of ethnic cleansing featured in political discourse.[9]

Unwilling to give up, the EU was strict, threatening that failure to cooperate fully with the ICTY could ‘seriously jeopardise’ rapprochement to the EU.[10] This threat appeared to be real – when Croatia was slow to arrest those indicted by the ICTY, especially General Ante Gotovina (who was indicted on a number of war crimes and crimes against humanity committed during the Croatian War for Independence), insufficient cooperation with the ICTY was used as a ground to suspend Croatia’s accession talks.[11] Such strategy appeared to be effective and in 2005 Croatia finally arrested Gotovina. Interesting to note, in November 2012 he was acquitted on all charges by the appeals panel at the ICTY and the Croatian government plane flew the general home, where he was treated like a hero.[12]

Accession negotiations

The negotiations with Croatia were divided into 35 negotiating chapters (31 was in case of earlier enlargements) – some new, some just result of the re-structure.

The list of chapters to be negotiated by Croatia for the first time (with Turkey) included ‘judiciary and fundamental rights’. Such a novelty highlighted that fundamental rights is no longer regarded solely as an eligibility condition, but forms an integral part of EU acquis.[13]

This new chapter, including judiciary, the fight against corruption and organised crime, fundamental rights and the already discussed ICTY co-operation, also appeared to be the toughest of the negotiating chapters. EU Commissioner Viviane Reding in 2011 called the chapter of judiciary the “last stumbling block” of Croatia’s accession. She praised the progress, admitting that “in one year, they have completely reformed their judiciary system and have made it irreversible”.[14]

When closing the negotiations, EU officials seemed very excited. Commission President Jose Manuel Barroso said he wanted “to applaud the Croatian authorities, in particular the current government, for their hard work over the last years”. EU Enlargement Commissioner Stefan Fuele, meanwhile, stated that Croatia had changed “tremendously” during the EU accession negotiations, morphing into a “mature democracy based on the rule of law and into a functioning market economy”.[15]

Despite the applause, however, critics still claimed that Croatia’s reform efforts were far from sufficient. The positive attitude of the EU, they argued, represented strong pressure from Member States such as Hungary, Germany, Austria, Poland and the Czech Republic to allow Croatia to join.[16] This ‘friends and enemies trump real progress’ attitude is quite widespread in the Balkans. Adding this to the fact that Bulgaria and Romania are often seen as examples of accession with insufficient progress, this seems to further downgrade the importance of EU conditionality towards acceding countries.

Western Balkans on the rocky road into Europe’s club

The other Western Balkan States are still waiting at the EU’s door. They understand that since 1990s the EU enlargement process became much harder for the candidate states. The road to the EU is clearly marked by signs asking to jump through many hurdles and over many rocks.

It is widely accepted that in respect of the states that acceded to the EU in the 2004 and 2007 enlargement rounds, the EU imposed much more stringent accession conditions than it used to impose. However, due to bloody wars related to the fall of Yugoslavia and post-war challenges, the EU conditionality set for the Western Balkan states is even more of a multi-level phenomenon than before.

Firstly, Western Balkan countries are subject to the accession criteria set out in Articles 2 and 49 of the Treaty on European Union (TEU)[17] and the Copenhagen criteria laid down at the European Council meeting in Copenhagen in 1993.[18] Article 49 TEU constitutes the legal basis for accession to the EU. It states that any European state which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union. [19] The Copenhagen criteria, meanwhile, is much more precise and require from any country wishing to join the EU to abide by the certain accession conditions, including political and economic criteria as well as acceptance of the EU acquis.[20]

Secondly, in the case of the Western Balkans, the EU significantly complemented the Copenhagen criteria by extending political conditionality and adding region-specific conditions encapsulated in the Regional Approach[21], the Stability Pact[22] and the Stabilization and Association process,[23] as well as the peace agreements and political deals. The EU listed additional conditionality including full cooperation with the ICTY, respect for human and minority rights, creation of real opportunities for refugees and internally displaced persons to return and a visible commitment to regional cooperation.[24]

Thirdly, extending the Copenhagen and Madrid Criteria, the Stabilisation and Association Agreements’ concluded with the Western Balkan states require “respect for democratic principles, human rights and the rule of law; the establishment of a free trade area with the EU; and the achievement of rights and obligations, in areas such as competition and state aid rules, that allow the economies to integrate with the EU”.[25]

In such a way, when knocking at the EU’s door, Croatia, together with other Western Balkan states, was presented with an extensive list of conditions it needed to fulfil to be able to join the club. With ups and downs discussed above, it proceeded and, as we witness today, successfully reached the goal attaining this exclusive club’s membership card.

A happy ending?

As noted by Hillion, Croatia’s accession to the EU illustrates that the Union is a polity that continues to attract, that it is helping to turn one of the darkest pages of Europe’s recent history, and that it sticks to its commitments.[26] Indeed, admitting Croatia to the EU is a significant step towards Europe’s reconciliation and important for still continuing peace building in the Balkans.

However, apparently the Croatians do not seem to be too enthusiastic anymore. Two and a half months before Croatia joined the EU, just 21% of voters bothered to cast ballots in 14 April 2013 election of 12 new MEPs.[27] On the other hand, considering the falling turnout in EU MEPs elections in the older EU Member states where voting is not compulsory,[28] one might say that this is simply typically European.

[1] Slovenia and Croatia declared their independence on 25 June 1991. Slovenia, which did not have a considerable Serb minority, managed to secede without getting engaged into Balkan wars. Due to this reason it was faster to develop and joined the EU with the 2004 ‘big-bang’ enlargement group.

[2] See further M.A. Vachudova, “Strategies for Democratization and European Integration in the Balkans” in The Enlargement of the European Union, ed. M. Cremona (Oxford University Press, 2003), p. 120.

[6] The term ‘Western Balkans’ is used as including Albania, Bosnia and Herzegovina, Croatia, the Republic of Macedonia, Montenegro, Serbia, as well as Kosovo under UNSC Resolution 1244/99. See, for example, Communication from the Commission to the European Parliament and the Council “Western Balkans: Enhancing the European perspective”. COM(2008) 127 final.

[13] For more extensive analysis see ‘Editorial comments: Fundamental rights and EU membership: Do as I say, not as I do!’ (2012) 49 Common Market Law Review, Issue 2, pp. 481–488; Gráinne de Búrca, Beyond the Charter: How Enlargement Has Enlarged the Human Rights Policy of the European Union, 27 Fordham International Law Journal (2003), p. 679.

[19] The values of Article 2 include respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities.

[20] (i) stability of the institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities (political criteria); (ii) the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union (economic criteria); (iii) the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union (acceptance of the Community acquis).

[21] Council conclusions and simultaneously adopted Declaration on former Yugoslavia. Bulletin EU 1/2-1996.

[22] See http://www.stabilitypact.org/default.asp. In 2008 the Stability Pact has been superseded by the Regional Co-operation Council, which up until now oversees regional co-operation in SEE and supports the European and Euro-Atlantic integration of the WB.

[23] Conclusions of the General Affairs Council of 21 June 1999, based on the Commission Communication to the Council and the European Parliament on the Stabilisation and Association process for countries of South Eastern Europe COM(99) 235 of 26.5.99.

This year has been deemed the Year of the Citizen by the European Union, thus it seems appropriate to look at what it actually means to be an EU citizen today. EU Citizenship was introduced (some would say invented) in 1992.[i] It was initially a merely symbolic concept with very few actual consequences; however the Court of Justice of the European Union (the Court, the Court of Justice) has over the years significantly expanded its relevance to create a number of rights. In one early case, Grzelczyk, the Court stated “Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.”[ii] In this article I shall first briefly explore what is meant by the phrase ‘fundamental status’ and then contrast its possible meanings against some of the Courts case law.

The Fundamental Status Question

What is meant by making EU citizenship the ‘fundamental status’ of nationals of Member States is not expanded upon by the Court. One could see there are two possible meanings of ‘fundamental status.’

The first is the idea that it is the most important status for citizens implying that it supersedes any national identity. This seems to be incorrect since Article 9 of the Treaty on the European Union provides that ‘Citizenship of the Union shall be additional to and not replace national citizenship.’ The fact that citizenship is dependent on Member State nationality also discredits this definition of ‘fundamental status.’

The second possible meaning is that it is supposed to eliminate the possibility of discrimination on the basis of nationality. The idea being that once EU law is engaged the only status that matters is our EU citizenship. This is supported by the principle laid down in the case of Martinez-Sala[iii] that citizenship provisions may only be invoked where EU law is engaged; they are not applicable in purely internal situations. However the Court has certainly expanded the concept of EU citizenship in unexpected ways in order to rule on matters which seemed to be purely internal situations. The case-law on this point shall be explored below, but first it is important to discuss the case of Martinez-Sala in more detail.

Martinez-Sala

It is always important to discuss Martinez-Sala case when exploring the direction in which the Court of Justice is taking citizenship because it represents a big shift in the ideals underpinning the EU model.

The case concerned a Spanish mother living in Germany who was refused a child benefit because she could not produce a certain residence document. It was not disputed that from a national perspective the decision was valid. Moreover, all the parties to the case, including the German government, acknowledged that refusing the benefit due to lack of residence document was discrimination exclusively based on her nationality. However, the German government argued that the case did not fall within the scope of Community law, because Ms. Martínez Sala could not be regarded as a worker.

Prior to the Maastricht Treaty this would have been the case, however, Ms. Martinez-Sala argued that the very fact that she was an EU citizen brought the case within the scope of EU law. And the Court of Justice accepted this argument stating that after the creation of EU citizenship, the relationship between a Member State and nationals of another Member State were governed by Community law, even if the citizen in question was economically inactive.

It is widely recognized that this case significantly extended the scope of EU law and enhanced the rights of non-economic migrants. It discarded the idea of EU citizenship as a warm fuzzy nothing which simply encompassed rights which already existed and transformed the concept into something with real meaning. It brought all EU nationals – whether economically active or not – under the same banner of EU citizen and thus abandoned the perception that EU law concerned only ‘workers’. This was a fundamental change in the EU’s outlook, moving it away from a purely economic body to a more political being – something that unites all the people of Europe. It also represented a further limitation on Member State power in an important area of sovereignty – the relationship between a state and its residents. This limitation on sovereignty is a theme which also runs through the cases to be discussed below.

Chen

In Chen[iv] a pregnant Chinese national moved legally to Northern Ireland and gave birth there. Every baby born in Northern Ireland was entitled to dual Irish and British citizenship. The mother then moved to Wales where they applied for long-term residence, which was refused.

This was challenged as breaching EU law because the baby was an EU national and as such was free to move around the Union as she pleased. This was not denied but the mother was not an EU national – could she exercise her daughters free movement rights? The UK government argued that because the mother was not an EU citizen, this was a purely internal situation regarding the UKs immigration policies.

The Court of Justice thought otherwise. It reasoned that the mother was her daughter’s primary carer and financial support, and without her the baby’s citizenship rights would be meaningless. Thus the mother should be able to stay with her daughter for as long as she is her dependent. The Court of Justice met the outrage of Member States by stating that this was not an abuse of citizenship rights nor was it an infringement of Member State sovereignty because the states themselves decide how nationality is granted. This is compatible with the view of the ‘fundamental status’ of citizenship being a basis for the elimination of discrimination because it recognises that the baby’s citizenship rights cannot be stripped from her purely because of her age. The fact that the Court reiterates the point that Member States are free to set their own nationality laws reinforces the idea of the ‘fundamental status’ of citizenship as being parasitic in nature. It will only apply to people the Member States see fit to grant nationality to.

Rottman

However in the case of Rottman[v] the Court did impinge on Member State nationality rules on the basis of citizenship. In that case an Austrian man acquired German nationality by naturalisation and as such lost his Austrian nationality. Germany then wished to revoke his German nationality on the grounds that it was obtained fraudulently (Mr Rottman had not disclosed he was under investigation in Austria).

A preliminary ruling was sent to the Court of Justice asking whether or not the citizenship provisions meant the withdrawal of German nationality also resulted in a loss of EU citizenship. If this was the case then Mr Rottman would be rendered stateless.

Although the Court of Justice emphasised the fact that acquisition and loss of nationality are matters for the Member States, it went on to say that where a citizen of the Union is to be rendered stateless then the situation shall fall within the scope of EU law. Such a decision will be reviewable in light of EU law against the principle of proportionality. The Court then went on to specify that to be proportionate the authorities must consider and correctly balance factors such as whether this decision is justified in relation to the gravity of the offence committed, the lapse of time between the naturalisation decision and the withdrawal decision and whether it is possible for that person to recover his original nationality.

Thus the Court used EU citizenship as a way of reviewing the legitimacy of a decision to revoke the nationality of a citizen of the Union. This lends more credit to the idea of EU citizenship as superseding national citizenship. Whether or not EU law is truly engaged here depends on the relationship between EU citizenship and Member State nationality. If, as outlined above, EU citizenship is parasitic in nature, the removal of Member State nationality should not concern the Court of Justice. Once nationality is removed so is its jurisdiction. However, the idea that the Court of Justice can interfere with the removal of nationality on the basis of EU citizenship suggests that they are more intertwined than that. Citizenship therefore seems to take precedence over Member States sovereign rights to determine its nationals which point to it as a replacement national identity. The case also has nothing to do with the elimination of discrimination which seems to move EU citizenship away from that meaning.

Ruiz-Zambrano

The highly unusual case of Ruiz-Zambrano[vi]is the most significant indicator yet of the idea of citizenship as superseding national identity. Mr Zambrano was a Colombian national who left his country of origin and sought asylum in Belgium. His asylum application was rejected but he was not sent back to Colombia. His subsequent applications for asylum or to have his situation regularised where also refused.

Despite this, he and his wife became registered as residents of a Belgian municipality and began to work full-time. Meanwhile his wife gave birth to two children who had Belgian nationality. Mr Zambrano lost his job when the Belgian authorities gave notice to his employer that he did not have a work permit. Then he was unable to claim unemployment benefit and he challenged the refusal of the Belgian government to grant him a work permit or in any way regularise his situation.

This went to the Court of Justice. The Belgian government, along with various other intervening Member States were of the opinion that situations such as these – where the children of non-citizens of the Union have never exercised their right to free movement – does not come within the remit of EU law.

The Court once again emphasised the idea of EU citizenship as the fundamental status of nationals of Member States. It then went on to say that as such Article 20 TFEU precludes measures ‘which have the effect of depriving citizens of the Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union.’[vii] It then went on to hold that the refusal to grant a work permit to the father of EU citizens who were still dependant on him had such an effect and thus was in breach of EU law.

This seems to have entirely removed the need for a cross-border link in order for citizenship provisions to be applicable. This case again has nothing to do with discrimination. Unlike in Chen, the children here have not attempted to exercise their EU citizenship rights and been discriminated against. This judgement implies that the Belgian government should have recognised that these children were first and foremostly EU citizens and that an act which deprives them of the possibility of exercising the rights bestowed by that identity will be prohibited. This seems to exemplify the idea of EU citizenship being more important than national identity. It allows the Court of Justice to interfere in areas which until now had been thought outside its reach.

The Future of EU Citizenship

From the above case law we can see that the prediction in Grzelczyk[viii] has had a lasting impact on the case law of the Court. The ‘fundamental status’ of citizenship was initially used to ensure equal treatment between nationals and non-nationals. It was based on the argument that we are all European, ergo we should receive the same treatment in other Member States. However, the reference to the ‘fundamental status’ in later cases such as Rottman and Ruiz-Zambrano show that it may have a different meaning. The pure status of ‘citizen’ seems to confer a package of rights and duties. These rights and duties are to be protected regardless of whether or not they have been exercised. However, recently the Court moved away from this style of judgement.

In McCarthy[ix], a woman was a national of both the UK and Ireland, however, she had never resided elsewhere. Following her marriage to a Jamaican man, she obtained an Irish passport and applied to the UK authorities for a residence permit as an Irish national wishing to reside in the UK. Her husband applied for a residence document as the spouse of an EU citizen. The UK refused the applications. The Court of Justice found that the EU Directive which allowed for the spouse of an EU citizen to reside with them in the EU did not apply here because she had never exercised her right to free movement. She had always resided in a Member State of which she was a national. So it appears that the Court has drawn a line under Ruiz-Zambrano. The cases of Rottman and Ruiz-Zambrano were exceptional with very sympathetic circumstances so they may possibly be conceived as a ‘one offs’.

The number of intervening Member States in cases such as Ruiz Zambrano (7 states) and Rottman (8 states) reveal the dissatisfaction with the way the Court has used the citizenship provisions. No doubt when the citizenship was ‘invented’ it was meant as a woolly provision, not a tool for the Court to further limit Member States’ power. The turnouts for the elections to the European Parliament with less than 50% of the population voting in 2009[x] indicates the public does not see its EU citizenship as its most important status. This is supported by a poll which found that only 18% of Europeans know their rights as EU citizens and only 41% knew what ‘citizen of the EU’ meant.[xi] Thus it seems evident that the people of Europe do not consider their most important status to be that of EU citizens. The idea of it as removal of discrimination may also be tested in the coming months. The Eurozone crisis has reignited anti-EU feeling within many Member States and reinforced divisions among its citizens. The attempts by various Member States,[xii]including the UK, to qualify the access of Romanians and Bulgarians to free movement and non-discrimination shows the solidarity of the EU may be crumbling. Such behaviour does not exactly seem to be in the spirit of the Year of the Citizen.

The ‘golden shares’ (hereafter GS) were created at the time of privatisation when the EU Member States’ Governments were actively disposing of their shareholdings in former state monopolies, such as energy companies and telecoms. Under the normal operation of company laws a loss of share ownership would normally trigger a loss of control. However, since many of the privatised companies were operating in strategic industries which provided public services, the Governments sought to retain their controlling grip via ‘golden shares’. Being a special class share, GS grants its holder (usually the Minister responsible for the relevant industry) with a wide range of special powers that allows them to control the company. Such State-driven interventions could make acquisitions in companies less attractive, thus the use of (non-discriminatory) golden shares could be justified only by the existence of overriding public interests and only if applied in a legally certain and proportional way.[i] The striking majority of GS, which were put to the scrutiny of the Court of Justice, have failed to pass this justification test, the only exception being case C-503/99Commission v Belgium.[ii]

Passing the justification test

In Belgium the GS in two strategic energy companies SNTC and Distigaz were implemented by virtue of two Royal Decrees of 10 June 1994[iii] and of 16 June 1994[iv] respectively, allowing the Minister for Energy to exercise limited special powers. The Minister had the right to be notified in advance on any transfer of company’s system of lines and conduits or on any dealings in other strategic assets of the company, which are essential for the domestic distribution of energy products.[v] Within 21 days after receiving prior notification the Minister could oppose any of the above operations in cases where they could have adverse effects to the national interests in the energy sector.[vi] The GS also empowered the Minister to appoint two non-voting representatives of an ‘advisory capacity’ to the board of directors, which could propose the annulment of any decision that is deemed contrary to the national energy policy.[vii] The Belgian GS have passed the narrow justification test since they granted the Minister with special powers which were limited to certain decisions concerning specific strategic assets of particular companies, and were limited by time. Apart from Belgian GS, no other arrangement of such kind has been justified. In spite of the narrow justification criteria some Member States were eager to retain their GS following the condemning judgement: they sought to adjust national laws to match those of Belgium.

Obstinate and insufficient: Italian golden shares

Italy could be seen as an example of persistent non-compliance with the Court’s judgements, since the Government held on to its GS while continuously amending their scope and application in quest for passing of the strict justification tests.[viii] Due to this tactics the golden share Decree-Law 332/1994[ix] (created back in 1994) became an obstinate piece of legislation. GS created by the foresaid Decree were repeatedly overruled by the Court delivering condemning rulings in 2000 (Case C-58/99)[x] and 2009 (Case C-326/07)[xi]. Over the course of the infringement proceedings the Italian Government has shown its loyalty to the EU law by revealing an inclination to comply and amend its GS. Nevertheless, for nearly a decade, the Government’s willingness to conform was not supported by adequate compliance initiatives. Since the first ruling the Italian GS have undergone a number of makeovers, yet those amendments proved to be ‘bad laws’, while being inadequate and insufficient to remedy the breaches established by the Court.[xii] The compliance initiative by former Prime Minister Silvio Berlusconi[xiii] of 20 May 2010 proved to be insufficient[xiv] and the Commission has pursued a penalty action under Article 260 TFEU. When the new technocratic government (led by former EU Competition Commissioner Mario Monti) has been appointed in November 2011 to implement necessary austerity measures, the final compliance on GS could have been envisaged. Monti has confirmed that in time of the general elections the new golden share law would be drafted and implemented. Monty has stood up to his promise and on 16th of March 2012 (one year prior to general elections scheduled for April 2013) a new golden share Decree-Law No.21 entered into force (hereinafter – the Law).[xv] The Law sought bringing the national GS in proximity to the justified Belgian measures: the long-awaited urgent compliance measure recasts original GS of Decree-Law 332/1994.

The new golden share law

The new law has limited the discretionary powers reserved for the Italian authorities to veto and approve certain important decisions in companies which operate in defence and national security and in companies which hold strategic assets in energy, transport and communications industries. Firstly, the execution of special powers is now divided between the two types of companies/assets and two separate Articles provide detailed rules for each of the types, guaranteeing legal certainty as found in Belgian law. Secondly, the Law has a wider scope of application: it applies to any company operating in defence or national security and to all companies that hold ‘strategically important assets’. The latter innovation extends the applicability of the GS beyond the boundaries prescribed by Belgian law (which applied only to two companies). Lastly, the exercise of special powers appears to be less generic and is limited to time-limited, specific circumstances. For example, Article 1 of the Law states that special powers in defence and national security companies could be ‘triggered’ in case of a serious threat to the essential interests of defence and security of the Italian State. In case of such a threat the Italian government has special powers to (a) impose specific conditions on the purchase of an interest; (b) power to veto resolutions of the General Meeting or the Board of Directors concerning important decisions; and (c) power to oppose a purchase of shares by any person if such acquisition could jeopardize the interests of the defence and national security.

Defence and security companies

As a pre-condition for exercise of special powers in defence and security companies the seriousness of a potential threat to the essential interests has to be evaluated and the following assessed: the purpose of the resolution, the strategic assets or businesses subject to the transfer, suitability of the defence system and national security, information security relating to military defence, international interests of the State, protection of the national territory or critical infrastructure.[xvi] In order to evaluate the seriousness of a potential threat the Government shall, in accordance with the principles of proportionality and reasonableness, apply a ‘fit and proper test’ in light of the buyer’s potential influence on society, taking into account the adequacy and the reliability of the buyer. Monti’s Law sets the prior notification obligation similar to Belgian GS: any operation that has the potential to be vetoed has to be notified to the Government within ten days prior to implementation of such operation. The Government can exercise its veto power within fifteen days following notification if any of the risks mentioned above become evident. The veto power could be exercised in form of imposition of specific conditions sufficient to safeguard the essential interests of defence and national security.

Energy, transport and communication companies

Article 2 of the Law governs special powers in strategic companies operating in energy, transport and communications sectors, covering companies, plants, assets and relationships which are of strategic importance, are dealing with network industries and are vital to ensure the minimum supply and the continuity of essential public goods and services of strategic importance. The prior notification obligation also applies to the above companies and it has to be made within 10 days prior to important operations.[xvii] The Government could veto any of such operations within 15 days of receiving the notification, if such operation could possess actual and serious threat to the public interests of safety and operation of networks, services and plants and possess threat to continuity of vital supply of any such services. The Government is also entitled to impose conditions or veto purchases of ‘strategic assets’ for companies or residents originating from a non-EU country.[xviii] Any such acquisitions must be notified to the Italian Government within 10 days prior to transaction and it could then either veto or make such an acquisition subject to specific conditions within 15 days from receiving notification. The power to veto/impose specific conditions could be exercised only in exceptional situations where the public interest relating to the safety and operation of any ‘strategic asset’ may be materially jeopardized. In case of Article 2 a ‘fit and proper test’ will be carried out in light of the buyer’s potential influence on the society.

New golden share doomed?

Monti’s new GS Law aimed at establishing a comprehensive, legally certain and precise investment control regime in the strategic sectors. More than a decade of inadequate compliance initiatives have seemed to come to an end. However, in order to be fully effective the Law had to be ‘activated’ by further Decrees of the Prime Minister, specifying which companies and ‘strategic assets’ are subject to new regime.[xix] The deadline for implementation of Decrees was in September (for companies operating in energy, transport and telecoms) and August (for defence and security sector) 2012, but no such Decrees were implemented, rendering Monti’s ‘good law’ ineffective.

Due to the new developments on Italian political arena, in spite of the technocratic Government’s promises, the ‘activating’ Decrees could not be implemented in time: Italian politicians have prevented this from happening. Berlusconi blamed Monti’s Government for driving Italy into further recession and after losing the support of major parties, Monti had to resign on 8 December 2012 leaving the GS issue unsettled.Following Monti’s resignation, the Italian Parliament has been dissolved while the elections which followed in February 2013 culminated in ‘political stalemate’.

The necessary Decrees on golden shares are not likely to be implemented in the foreseeable future, since the political party, which won a majority in Italian Chamber of Deputies, does not have a majority in the Senate (both majorities are necessary for the Law to be implemented). The EU Commission is currently looking at the Monti’s Law, but with reservation for further Decrees, the new GS regime as a whole could only be evaluated if (and after) all legislative measures are implemented.

Concluding remarks

For nearly two decades the GS are in place and over the years the Italian Government has repeatedly tested the patience of the EU Commission while engaging with procrastination and non-compliance with the condemning judgements on GS. At the time of implementation of first Italian GS, Berlusconi’s Government was in office and over years it has resisted to fully withdraw unjustified laws. Monti’s Law had a possibility of a bright future – it could have started a new chapter on GS justification. However, the latest elections precluded this from happening since Berlusconi’s protectionist influence is yet again back on political scene. The ‘loyalty to the EU principle’ enshrined in Article 4(3) TEU is seems to be, once again, neglected.

[xii] First amendment: Article 66 of Financial Law No 488 of 23/12/1999 and Decree on 11/02/2000 aimed to bringing legal certainty to when the special powers of Decree-Law 332/1994 could be used, (in Italian) at: http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:1999;488 Gazzetta Ufficiale, n. 302 del 27-12-1999; for Decree 11/02/2000 see http://gazzette.comune.jesi.an.it/2000/40/5.htm; Second amendment: Article 4(227) to (231) Finance Law No 350 of 24/12/2003 and implementing Decree of 10/06/2004; (‘Urgent provisions to ensure the liberalisation and privatisation of specific public service sectors’, GURI No 170 of 24 July 2001), published in Italian Official Gazette No 120 on 25 May 2001, the original text could be found at: http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto-legge:2001;192; For Berluscony’s Decree in Italian see Decreto Del Presidente Del Consiglio Dei Ministri 20 maggio 2010 (published in Italian Official Gazette n.117 del 21-5-2010 ) (10A06506).

[xvii] Actions such as changes in ownership structure, winding up, merger or de-merger, transfer of the head office abroad, change the corporate purpose, dissolution of the company, change of statutory provisions, transfer of subsidiaries.

The (previous named) ECJ’s decision in September 2008 in Kadi I has been called “one of the most discussed judgments in ECJ history.”[1] Following the recent release of the Attorney General’s Opinion in Kadi II, and in anticipation of the CJEU’s decision, this controversial litigation appears an apt topic for ‘The Year of the Citizen’. Bearing in mind the original conception of the European Union as a trade union, the fact that one of the Court’s most discussed judgments concerns anti-terrorism measures against individuals demonstrates just how much the sphere of the Union has grown to encompass. This article will explore but a few of the vast range of legal issues raised by the “saga” of the Kadi cases.[2]

The background

The Kadi cases are the most notable in a series of challenges against the targeted asset-freezing sanctions stemming from the United Nations Security Council (UNSC). The EU Regulation that Mr. Kadi challenged (in so far as it applied to him) implemented Resolution 1267 (1999) of the UNSC, which set up the sanctions regime targeted at Al-Qaeda and associated individuals. Unlike other lines of sanctions,[3] the 1267 sanctions list is controlled by a subsidiary body of the UNSC, known as the Sanctions Committee.

Mr Kadi was first included on the sanctions list in 1999. Once listed, Mr Kadi was subject to a worldwide asset-freeze and travel ban – all without being informed of the reasons for his listing or being given any meaningful opportunity to challenge the measures. Targeted asset-freezing sanctions are the most severe illustration of the move in counter-terrorist action in the ‘war on terror’ towards pre-emptive action, in clear violation of the principles of the rule of law.

Kadi I

In Kadi I, the (then) ECJ in 2008 reversed the decision of the (then) CFI with regards to its ability to review the legislation in light of certain fundamental rights. The CFI had held that such a review of the EU Regulation was precluded by virtue of the source of the measure being implemented: the source being the UNSC. The crucial difference that so changed the outcome of the ECJ’s decision was the finding, in accordance with the principles from Les Verts,[4] that all EU measures are subject to review against established legal standards regardless of the source of the measure.[5] After having crossed this hurdle, the ECJ then conducted a marginal review of the Regulation, which was all that was required to establish a breach of due process rights.[6] This led the Court to annul the measure in so far as it applied to Mr. Kadi, but not without the delay of three months being given to the Commission to allow them to review their procedure in light of the judgment.

This decision provoked strong reactions from both ends of the spectrum. Outrage revolved around the ECJ’s audacity in interfering with matters as paradigmatically political as counter-terrorism action, and for disregarding the EU’s obligations towards international law through conducting (what effectively amounted to) an indirect review of the UNSC.[7] Praise, on the other hand, focused on the ECJ’s strong stance in relation to its protection of fundamental rights.[8]

While space does not permit a detailed examination of these arguments, it is suggested here (in agreement with Maya Lester, counsel for Mr. Kadi, and Piet Eeckhout) that the decision was far from revolutionary and was in fact appropriate in context.[9] The case confronted the issue of which of the EU’s fundamental Treaty principles to prioritise legally when they came into conflict: the EU’s international obligations under Article 3(5) TEU (chosen by the CFI), or fundamental rights and principles of law under Article 2 TEU (prioritised by the ECJ). The ECJ’s active role in promoting the EU as an institution that guarantees the protection of human rights is widely documented,[10] and such rights protection is “foundational for the EU’s democratic legitimacy.”[11] Had the ECJ followed the reasoning of the CFI and declined jurisdiction to review the Regulations by virtue of their origin, it would have left a gaping legal vacuum and the clear message for Member States that the guarantees of rights protection by the EU were empty rhetoric.[12]

The corrections made by the ECJ to the CFI’s legally flawed decision – which risked turning the UNSC into a “supreme, unfettered legislature”[13]- are therefore strongly supported by the wider considerations of the constitutional principles at stake. The ECJ made a decision to uphold human rights in the face of political pressure the contrary, demonstrating the substance behind the EU’s rights discourse. Furthermore, the frustration with the UNSC sanctions regime evident in the rising number of domestic challenges illustrates that the ECJ’s decision was necessary and timely.

The practical ramifications

Since the judgment in 2008, the UNSC has made a variety of modifications to the operation of the Sanctions Committee. ‘Narrative summaries’ of reasons for individual listings began to be issued in the aftermath of the judgment, and Resolution 1904 (2009) set up the Office of the Ombudsperson to review delisting applications – a direct consequence of the ECJ’s decision in Kadi I.[14] That the UNSC has not fought the challenges but rather implemented changes to the regime is perhaps the most convincing evidence in favour of the ECJ’s decision in Kadi I. Furthermore, a statement from the UN General Assembly issued in 2009 urged states to include “adequate human rights guarantees” in their national sanctions measures, which effectively endorses the ECJ’s position.[15]

Although these are moves in the right direction, the basic inadequacies in the regime still persist. The system still provides no procedure for impartial review nor guarantees concerning the adequate provision of evidence to those listed.[16] However, a distinct increase in the individuals being delisted can be seen on the Sanctions Committee website. Along with a number of other individuals, Mr Kadi himself was finally delisted at the level of the UN Sanctions Committee on the 5th October 2012. While the need for further change is still pressing, the international pressure on the Sanctions Committee to reform has shown that the Kadi I decision was a far cry from the “pyrrhic victory” prophesied by de Burca.[17]

Kadi II

March saw the release of Attorney General Bot’s Opinion in Kadi II. If the CJEU follows the Opinion, both decisions of the lower court in the Kadi “saga” will have been overturned on appeal.

The Kadi II litigation was launched to challenge Mr Kadi’s relisting following the ECJ’s decision in Kadi I. As the ECJ in Kadi I insufficiently addressed the implications of indirectly reviewing the operation of the Sanctions Committee or the appropriate level of review, the European General Court (EGC) had little guidance upon which to rely in Kadi II other than the phrase “in principle, full review”.[18] In line with the OMPI judgment, the EGC’s interpretation was that the ECJ intended review to extend beyond due process to a substantive review of the evidence on which the listing decision is based, all of which should be disclosed to the listed individual.[19] Not only does this raise issues regarding the ability of the European courts to conduct such review, it also dangerously fails to strike a reasonable balance between the interests at stake, and risks opening the doors for substantial judicial interference with the political prerogative of security management.

As such, it was advocated that the CJEU’s decision in Kadi II ought to take a more narrow interpretation of its Kadi I decision.[20] AG Bot has given the first indication of the line the Court will take, and, as anticipated, it has been narrowed: he recommends that the judgment of the EGC be set aside and the action brought by Mr. Kadi against his re-listing be dismissed. The Opinion clearly takes a more deferential stance towards the political nature of the counter-terrorist measures, and towards the UNSC’s designated role in identifying and tackling threats to international peace.[21] His suggested approach is that:

“The respect which the European Union must pay to…international law does not…have to be reflected in immunity from jurisdiction…but in an adaptation of the judicial review conducted.”[22]

A number of reasons are then given for conducting a low procedural review of the implementation by the Commission. As well as addressing the political nature of counter-terrorist action, notable amongst these is the reliance on the improvements in the procedure for review before the Sanctions Committee post-Kadi. As highlighted above, it is certainly debatable whether the Office of the Ombudsperson is in fact quite as effective in the listing and delisting process as the Attorney General maintains.[23] However, whilst the challenge in Kadi I was relatively straightforward once the ECJ established jurisdiction, the modifications since made to the regime do make a challenge at judicial level increasingly complicated. As Ginsborg and Scheinin advocate (also implicit in the Opinion), it is possible that the judiciary have gone as far as they can in pushing for reform of the sanctions regime and it has to be a political solution that confronts the remaining inadequacies.[24]

Interim conclusion

While the ECJ made an appropriate decision in Kadi I, especially in light of the flawed CFI judgment, it nonetheless opened a Pandora’s box – partly through the nature of the issues in the case, and partly due to repercussions from its own reticence. In addition to navigating the network of international organisations, the European courts are having to grapple with relatively novel issues concerning the role of the judiciary in reviewing counter-terrorism action, where on both sides there is much at stake: interference with individual liberty and the rule of law on the one hand, and the protection of civilians from heinous terrorist attacks on the other. After the overtly political decision of the EGC in Kadi II, it is highly likely in the light of the AG’s Opinion that the broad interpretation given to the ECJ’s judgment in Kadi I will be narrowed by the CJEU in their forthcoming decision.[25] It will be of significance for all cases concerning counter-terrorism measures exactly how the ECJ reconciles the conflicting interests of the individual, the state and the international order.

Although the judicial challenges to the UNSC sanctions regime have stimulated reforms at the UN level, the changes implemented thus far do not go deep enough. AG Bot’s Opinion reflects the current feeling that further improvement of the regime demands a political solution, namely developing cooperation between the EU and the UN in this area. However, considering that the deep structural deficiencies of the sanctions regime are reflective of a general trend in counter-terrorism towards pre-emptive action, it is perhaps wishful thinking to anticipate such fundamental change stemming from the originators and greatest advocates of such action. Nonetheless, despite targeted sanctions being the West’s strongest pre-action measure in the ‘war on terror’, their suitability for and efficacy in combatting terrorism is being increasingly doubted.[26] As Eckes says, “the end of fighting terrorism no longer justifies all means.”[27] It remains to be seen what means the end does justify.

[26] Murphy (2012: p.146). This is particularly in light of the low costs of funding terrorism – the cost of the London 7/7 bombings is estimated at less than £8000. Danziger, Journal of Money Laundering Control (2012) 15(2), 210-236.

The term European or, more precisely, European Union (EU) citizenship finds expression within a web of rights and responsibilities contained in primary and secondary EU legislation. This year marks the 20th anniversary of the establishment of EU citizenship and as such an EU campaign entitled ‘The European Year of Citizens 2013’ has been launched to raise awareness of the general public about those rights and responsibilities. The campaign also aims to send the message across the continent that EU citizens have an active role to play in reinforcing their EU conferred rights through their direct participation in the democratic life of the EU. The vitality of direct participation in the democratic life of the EU was recently highlighted by the Treaty of Lisbon.[1] The Treaty has introduced Article 11(4) TEU which provides for the European Citizens’ Initiative (ECI), a mechanism whose purpose is to give individual citizens a ‘voice’ in the EU.

This article provides a tour de horizon of the legal framework of the ECI and addresses certain criticisms expressed during its brief life, most recently at a conference on the first year of the ECI which took place earlier this year.[2] The article commences by briefly describing the need for a form of participatory democracy in the EU before it moves on to outline the ECI’s legal framework and the requirements for the submission of a successful Initiative. Whilst the focus is on the legal issues pertaining the functioning of the ECI, certain proposals for further review of the ECI’s legislative framework will also be considered.

The Need for Participatory Democracy

The journey for participatory democracy did not begin in Lisbon. For a long time now the increase of EU’s powers and impact since its inception, coupled with the establishment of the principles of direct effect and primacy of EU law by the CJEU, generated an increasing need for ‘input legitimacy’ in the EU.[3] In other words, since the early stages of European integration it was anticipated that the evolution of the EU and political choices of its Institutions (the legislature, in particular) needed to reflect the will of the people.[4] The attempts to create more legitimacy in the EU relied on the nation-state model of representative democracy, according to which citizens authorise representatives through elections to act on behalf of their interests.[5] A primary example is the evolution of the European Parliament. Although the European Parliament started as an assembly of national parliamentarians, since 1979 citizens vote for Members of the European Parliament.[6]

The above development aside, the continuous low turnout in European Parliament elections is often interpreted as a sign of public apathy and growing estrangement of EU citizens. As such, low voting turnout has raised concerns about the lack of communication between the EU and its people. Such detachment between the EU as a system of governance and the citizenry of the Member States has attracted criticism regarding the success of the European Parliament as a representative body. In order to bridge the gap the EU has created and developed a number of instruments which aim at enhancing participatory democracy at supranational level.[7] These include, inter alia, petitions to the European Parliament, the right to complain directly to the European Ombudsman and consultation campaigns by the European Commission before the launching of the formal legislative process.[8]

The Treaty of Lisbon attempts to strengthen the abovementioned representative and participatory aspects of the democratic life of the EU. Regarding the former, the Treaty enhances the powers of the European Parliament and increases the role of national parliaments in EU legislative scrutiny. Regarding the latter, the Treaty introduces the ECI, according to which one million signatures from seven Member States could allow a group of EU citizens to put considerable pressure upon the Commission to give serious consideration to their request and submit a legislative proposal to that effect.

The ECI is thus ‘the latest part of a movement towards establishing participatory democracy as a complement to existing forms of representative democracy in the EU.’[9]

The Legislative Framework of the ECI

Whilst Article 11(4) provides the legal basis for the ECI, it is the ‘ECI’ Regulation 211/2011 which establishes the conditions and provisions regarding the functioning of the ECI mechanism. The ECI Regulation was adopted after thorny negotiations and compromises between the Council and the European Parliament and formal registration of ECIs began on 1st April 2012. In a nutshell, the organisers of an Initiative need to set up a ‘Citizens’ Committee’ comprised by seven citizens from different Member States and form their initiative as either a draft legal proposal or as general principles. They must then register their Initiative with the Commission which has two months to accept or reject the registration. If the Commission accepts the initiative, a one year limit begins during which the Citizens’ Committee needs to gather one million signatures to support their proposal. The signatures can be gathered either online or on paper and they should emanate from seven Member States. It should be noted that there is a threshold of signatures for each Member State which is the number of each country’s Members of European Parliament multiplied by 750. Once the signatures have been gathered, they have to be certified by national authorities. The European Commission is then obliged to examine the initiative but it is not forced to take any form of action; it has absolute discretion on how to proceed with an ECI.

So far, twenty-four initiatives have requested registration to the Commission, of which sixteen have been registered. Two of them have been withdrawn, so there are currently fourteen open Initiatives. It is also noteworthy that eight Initiatives have been refused registration because they covered areas which fall outside the powers of the Commission.

Legal Issues

The provisions of the ECI Regulation have been subject to criticism as to whether they achieve the purpose of creating clear, simple, user-friendly and proportionate procedures and conditions so as to encourage participation by citizens and make the EU more accessible. [10]

To begin with, there are minimal legal criteria in order for an ECI to be registered by the Commission. According to Article 4(2) of the Regulation, an ECI cannot be registered if it is manifestly abusive, frivolous or vexatious or contrary to the values of the EU. Also, an ECI cannot be registered if its subject matter falls manifestly outside the powers of the Commission. The limitation that an ECI should fall in the scope of the competences of the EU is reasonable but could prove difficult for laymen who are not are not acquainted with the TFEU’s competence typology. Therefore, in order to ensure the correct wording of their proposals and the appropriate legal basis, organisers probably need legal advice which increases the required funding.

In addition, it is open to dispute whether the Regulation allows for ECIs which propose the alteration of Treaty provisions. As Dougan explains, the dispute does not arise because of a question on whether the Commission has the power to propose an amendment to the Treaties.[11] Article 48 TEU clearly identifies the Commission’s power to submit proposals for Treaty changes either through the ordinary revision procedure (Article 48(2)-(5) TEU) or through the simplified revision procedure (Article 48(6) TEU). The issue rather arises because of the wording of Article 11(4) TEU which refers to legal acts of the Union required for the purpose of implementing the Treaties. On the one hand, the European Parliament and Civil Society organisations support the view that ECIs should be used for this purpose since the Treaties concern vital topics of great interest to EU citizens. It has even been commented that excluding Treaty amendments is a significant departure from the effect utile of the ECIs.[12] On the other hand, most Member States interpret the ECI Regulation as referring to Initiatives aimed at amending existing secondary legislation but not changing the Treaties.

Although the requirement of one million signatures can be seen as proportionate in the current EU of approximately 500 million citizens, a host of bureaucratic issues has raised concerns to the various organisers vis-à-vis the effectiveness of the ECI. For instance, Annex III of the Regulation provides that the rules for collecting signatures shall be drawn up by the national governments. As a result, different signature requirements exist across the EU and eighteen countries require signatories’ ID or passport number in order for the signatory forms to be valid. A survey conducted by European Citizen Action Service, a non-profit organisation located in Brussels, indicates that there is strong resistance in the majority of the respondents to providing such personal data out of fear for their privacy.[13] Carsten Berg, director of an ECI Campaign, a coalition of democracy advocates and NGOs, has urged for the removal of such restrictive requirements. His view has been shared by most ECI organisers.[14] Five countries have announced very recently that they will reduce cumbersome requirements for ECIs after July 1st.[15]

Finally, Article 3(4) of the ECI Regulation provides that in order to be eligible to sign an ECI, signatories shall be citizens of the EU. As a result, third-country nationals and legal persons are not able to organise or sign an ECI even if they are lawfully resident within the EU or qualify for long-term residency status. This creates a contradiction between the right to an ECI and other political rights under Article 20(2) TEU. The non-inclusive character of the ECI mechanism ultimately creates a narrow concept of political participation which does not reflect the broad aim of the EU to offer fresh channels of public engagement. [16] ECI organisers have raised concerns about the issue of ECI exclusiveness of application to EU citizens by arguing that the current formulation leaves out a substantial percentage of the target audience from supporting an Initiative.

Conclusion

The past year has seen the registration of ECIs covering a range of policy areas from education (Fraternité 2020, High Quality EU Education for All) to human rights (One of Us) and from voting rights (Let Me Vote) to environmental issues (Waste Management, End Ecocide in Europe) and more.[17] As a matter of fact, a few days ago the Right2Water ECI became the first ECI which has managed to collect the minimum number of signatures in eight countries. The first year was arguably a successful one for ECIs despite some ‘teething problems’ faced by the organisers such as the complex procedural requirements and the technical burdens which cost delays and extra financing.

Taking stock of the problems that have emerged at this early stage, there have already been numerous recommendations regarding the review of the ECI Regulation which is planned to take place in 2015. Proposals have been made for the extension of the period of signature collection, establishment of an independent help-desk, internalization of the online collection signature server and enlargement of access to sign an ECI.[18] In addition, there are calls for the clarification of EU data protection law and for creating uniform requirements for signature collection around the EU.[19]

No doubt, by giving the opportunity to EU citizens to assist in setting the political agenda of the EU, the ECI can be characterised as an important step forward for transnational democracy in the EU. Nonetheless, current experience shows that there are still issues to be dealt with for the ECI to become an easily accessible and user-friendly instrument of participatory democracy

All in all, the Commission’s discretion regarding the outcome of an ECI should not be underestimated. One can only imagine the disappointment of organisers who, after having devoted endless amount of time and effort to gathering one million signatures, may find that their initiative has not made any substantial difference in the legislative framework of the EU. It is thereby submitted that the (positive) attitude of the European Commission and the other institutions is perhaps the most important factor in the success of the ECI mechanism. After all, no one would want to see ECIs turning from instruments of enthusiasm and engagement to reasons of frustration.

[1] European Union, Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community, 13 December 2007, 2007/C 306/01

J.D. Masters Diploma candidate in EU Law, King’s College London; Post Graduate Diploma in EU Law (Merit); Member of the New York Bar

I Introduction

On March 27, 2013, the Commission invited public comments regarding a proposal to simplify procedures under the EU Merger Regulation.[1] Changes would include altering market share thresholds relating to which mergers would qualify for access to the simplified merger notification procedure.[2] Additionally, Commission Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004[3] (`the Implementing Regulation’) would be amended with regard to the forms for merger notification.[4]

Mergers unable to qualify for notification under the simplified procedure would also benefit from the proposed changes.[5] Only information relating to markets in which the market shares of those firms merging, which is in excess of the established thresholds for notification under the simplified procedure, would be required for submission in a notification to the Commission.[6] An important aspect of the proposed changes would be that seventy percent of all mergers notified to the Commission would now qualify for notification under the simplified procedure.[7]

The issue is whether these proposed changes under the EU Merger Regulation will be helpful to fostering European competitiveness and economic development. This article will begin by briefly discussing the process of notifying a merger to the Commission with a focus on the simplified merger notification procedure; the changes to both the Notice detailing the simplified notification procedure as well as to the forms for notification under the Implementing Regulation will then be discussed; and finally, the article will assess the overall helpfulness of the proposal.

II The Simplified Merger Notification Procedure

Under the EU Merger Regulation[8]it is mandatory for the Commission to be notified of those mergers encompassing a “Community dimension” in order to obtain approval prior to effecting the merger with limited exceptions.[9] The EU Merger Regulation provides for this notification to the Commission before a merger may be implemented.[10] A determination as to whether a merger contains a “Community dimension” is governed by the turnover threshold of the merging undertakings under the EU Merger Regulation.[11]

The Commission Notice on a simplified procedure for treatment of certain concentrations under Council Regulation (EC) No 139/2004[12] (“the Notice”) provides for notification to the Commission using a form that is shorter and not as extensive with regard to its informational requirements for qualifying mergers that have not traditionally presented prima facie difficulties with regard to competition.[13]

Mergers qualifying under the simplified procedure may also obtain authorisation after a “lighter procedure” and without the need for the Commission to engage in an extensive investigation of the market relating to the merger being notified.[14] A “short-form clearance decision” for the merger is typically adopted within a period of 25 working days from the notification date to the Commission.[15] A more comprehensive Phase II Commission investigation will occur if the merger presents “serious doubts”[16] as to whether it will be compatible with regard to competition and the EU’s single market.[17] The objective of the simplified merger notification procedure is to increase the focus and effectiveness of controlling mergers under the EU Merger Regulation.[18]

A key benefit available to those merging undertakings with access to the simplified short form notification merger procedure is that of a reduction in the amount of detailed information and associated expenses, which would otherwise be expended in completing a non-simplified merger notification to the Commission.[19] The information that must be provided for a regular Form CO notification as well as for a notification under the simplified procedure is provided in Annexes I and II respectively of the Implementing Regulation.[20] It is a benefit to both the merging entities as well as to the Commission to encourage use of the simplified procedure, because of the reduction in resources under this form of merger notification.

III Proposed Changes

Expansion of access to the simplified merger notification procedure includes a proposal to increase the qualifying market share threshold under the Notice from 15% to 20% for those competing firms in the same market merging.[21] A merger concerning undertakings participating in markets that are upstream and downstream from one another would be able to take advantage of an increased 25% to 30% qualifying threshold for access to the procedure under the proposal.[22] Additionally, access to the simplified merger notification procedure under the proposal would be available where two undertakings are participants in the same market and their joint share of the market exceeds the threshold of 20%, but as a result of their merger, the resultant market share increase from the merger is insubstantial.[23]

The Implementing Regulation[24] will also be revised under the proposal with regard to the notification forms for mergers.[25] An important aspect of the proposed changes relates to those cases, which would be unable to qualify for access to the simplified merger notification procedure.[26] The firms engaged in a merger would be required to submit comprehensive information in a notification to the Commission solely for the markets in which their market share is found to be in excess of the thresholds established for qualification under the simplified merger notification procedure.[27] This is a positive change, which will enable the Commission to focus exclusively on information with the potential to pose a threat to competition within the single market upon implementation of the merger.

The primary objective underlying the short form simplified merger notification procedure is that of facilitating the process of notification and reducing burdens of an administrative nature for those mergers, which the Commission has traditionally found unlikely to present concerns relating to competition within the EU’s single market.[28] The proposed changes will act as a positive expansion toward the attainment of these goals.

The changes proposed are with the intent of streamlining and reducing resources otherwise unnecessarily expended on merger cases.[29] The Commission will instead be able to use its resources more efficiently on those mergers which necessitate a more comprehensive assessment and may actually result in a harmful impact upon both consumers and competition within the single market.[30] Additionally, burdens of an administrative nature for both undertakings notifying a merger and with regard to burdens imposed upon the resources of DG Competition will continue to be reduced by this procedure and its expansion.[31]

The Commission’s primary objective in amending the Notice as well as the notification forms under the Implementing Regulation is to reduce procedural administrative burdens in an effort to increase European competitiveness and to stimulate continued economic growth.[32] These changes to the Notice and Implementing Regulation will be helpful for the attainment of these objectives by encouraging a more efficient use of resources for both DG Competition and the merging parties.

IV Helpfulness of Proposed Changes

The primary concern regarding mergers under the EU competition law system is that a particular merger when effected will have the result of reducing post-merger competitiveness within the common market.[33] The proposed changes to the simplified merger notification procedure will not have the result of decreasing competitiveness or hindering the necessary scrutiny and control of mergers, which remain a primary and essential concern regarding any merger that is to be implemented within the single market. Expanding access to the simplified procedure as well as reducing burdens of both a financial and administrative nature for both the merging parties and DG Competition will foster greater growth within Europe; facilitate the notification of mergers, which are not detrimental to the single market; and stimulate greater European competitiveness.

It may be argued that expanding access to use of the simplified notification procedure will act as a detriment to competition and to the necessary oversight of proposed mergers within the single market. An increase in the qualifying market share for access to the simplified notification procedure may enable too many potential mergers to employ this procedure without sufficient safeguards. An increasing number of merging firms will be able to notify under the simplified and shortened notification procedure because of the increased qualifying percentages, thereby resulting in an increase in the number of mergers that the Commission will potentially approve without a comprehensive relevant market investigation.[34] A less comprehensive investigation of the market with regard to a greater number of qualifying mergers may hinder the Commission’s ability to engage in fully informed decision making and may result in greater threats to competition within the EU’s single market.

Additionally, amending the Implementing Regulation with regard to the merger notification forms would enable merging firms that are unable to qualify under the simplified procedure to only be required to provide information to the Commission with regard to markets in which the market share of the merging firms is in excess of the access threshold mandated under the simplified merger notification procedure.[35] It may be argued that a reduction in the amount of information being provided in a notification under this proposed change will have a negative impact on the Commission’s ability to make an informed assessment as to whether a merger should be approved and its assessment of potential anti-competitive effects.

However, the possible negative implications of the proposed changes appear to be outweighed by existing precautions taken by the Commission. The proposed increased qualifying percentages under the simplified notification procedure continue to be within “safe harbours” previously established by the Commission.[36] Additionally, mergers qualifying under the simplified procedure will continue to be subject to the EU Merger Regulation’s “ex-ante merger control” system.[37] The proposed changes will only benefit those mergers, which in the Commission’s experience have not posed a threat to competition rather than lowering existing safeguards, which would increase the probability of anti-competitive activity.[38] It is also important to note that the Commission will continue to require critical information in any notification, which potentially reflects a threat to competition, regardless of whether the notification occurs under the standard or simplified notification procedure.[39] A comprehensive investigation by the Commission of the relevant market where there is a potential threat to competition due to a proposed merger will also continue to take place.[40]

The changes being considered by the Commission do not reduce the oversight or scrutiny provided for under the EU Merger Regulation.[41] An example of oversight, which will be unaffected by the proposed changes is that of Article 16 providing for the Court of Justice to review Commission decisions regarding the imposition of fines or penalty payments.[42] Additionally, the Commission has the power under Article 8 to dissolve mergers where an incompatible concentration was effected without Commission approval or without adhering to a mandated condition for implementation.[43] Fines may also be imposed by the Commission if the information in a notification is false or misleading by the merging parties.[44] It is important that these safeguards remain unaffected by any proposed changes to the notification procedure.

Expanding access to the simplified merger notification procedure and updating the notification forms under the Implementing Regulation will not have a detrimental impact on the need to protect the EU single market from anti-competitive conduct regarding proposed mergers. Facilitating EU economic development in the field of mergers, which are subject to Commission notification, will have a positive effect on economic growth within the EU. Establishing greater access to the simplified merger notification procedure and updating the notification forms will facilitate the notification process and positively stimulate EU economic growth in the field of mergers.

V Conclusion

A proposal to expand access to the simplified notification procedure under the EU Merger regulation will have a positive impact on reducing administrative burdens and expanding European economic growth. Both the Commission as well as the merging parties will benefit from the proposed changes. Safeguards for the protection of the single market from anti-competitive conduct in the field of mergers will also remain in place and are unaffected by the proposed changes. Additionally, amending the notification forms under the Implementation Regulation will enable the Commission to focus its resources more efficiently and effectively on potentially problematic areas with regard to a proposed merger rather than on issues that do not raise any competitive concerns.[45]

]]>http://kslr.org.uk/blogs/europeanlaw/2013/05/06/proposed-changes-to-simplified-merger-notification-procedure/feed/0REVIEW: EU Law Panels at the International Graduate Legal Research Conference (IGLRC) 2013 at King’s College London, 8-9 April 2013http://kslr.org.uk/blogs/europeanlaw/2013/04/24/review-eu-law-panels-at-the-international-graduate-legal-research-conference-iglrc-2013-at-kings-college-london-8-9-april-2013/
http://kslr.org.uk/blogs/europeanlaw/2013/04/24/review-eu-law-panels-at-the-international-graduate-legal-research-conference-iglrc-2013-at-kings-college-london-8-9-april-2013/#commentsWed, 24 Apr 2013 11:59:13 +0000editorhttp://kslr.org.uk/blogs/europeanlaw/?p=435Christy Burzio and Adrienne YongPhD Candidates at King’s College London

It was a great privilege for the authors of this post to have been present for the seventh annual IGLRC held at King’s College London on the 8-9 April 2013. Indeed, the panels were sure to provoke a lot of great discussion chaired by Professor Alex Türk, both in the realm of the tense political, social side of the Union and in the midst of the tough economic times Europe faced and still faces. As greatly varied subjects within EU Law itself, there were two panels split accordingly, the first discussing the EU’s modern social side including issues on identity, fundamental rights and political undertones of judicial review and revocation and the second primarily focused on the financial side of the EU in austerity, agencies and supervisory authorities in banking.

The first panel consisted of Eleni Frantziou (University College London), Ana Júlia Maurício (Cambridge) and Erin O’Leary (Liverpool John Moores). It was interesting that whilst the topics of each presenter did vary greatly on the face of it, it would ultimately emerge that they all voiced a commonality. Some presented it as a concern, others as an issue to be acknowledged. They all came back to the same point regarding the un-reconciled status of the EU as lacking coherence in terms of its policy and direction. However, whilst pessimistic in nature on the outset, the three presenters each demonstrated a keen desire for there to perhaps be more room for constitutionalism within the EU legal order and structure. The presence of this trend was an interesting one to note and one certainly considered as being characteristic of the EU generally. The themes were presented from the point of view of fundamental rights and horizontal effect, from national final administrative acts and revocation and from a more socio-legal linguistic identity point of view.

The first panel began with a refreshing reference to artistic culture, entitled ‘The constitutional value of the Charter of Fundamental Rights after Lisbon: The importance of being earnest’, analogising Oscar Wilde with the constitutional value of the Charter of Fundamental Rights. After an update on the status of fundamental rights under Lisbon, the sensitive issues were tackled. The fact that there was an undermining of the Charter’s constitutional impact was lamented, which hindered the consolidation of a European identity. This was due to excessive reliance on general principles of EU Law as opposed to the Charter in governing how citizens enjoy rights. It was argued that the Court of Justice of the European Union (CJEU) had to be earnest about their direction for the Charter before it could be clearly stated exactly what their intentions were. The perspective advanced was that there needed to be a new methodology for the application of human rights following the Lisbon Treaty, placing the Charter first, then the ECHR, and following that, general principles to aid in correct interpretation. This interesting methodology instigated a lively debate considering its merits and demerits leaving great food for thought as we then delved into a more technical topic.

The provisions and conditions regarding revoking national final administrative acts could be described as a niche area, certainly the thoughts of this author when reading the title of the second presentation, ‘National final administrative acts contrary to EU Law: A critical analysis of the Court of Justice’s case law’. The speaker considered the political relationship between remedies and behaviour of MS in complying with EU law. Though a topic clearly outside many of the attendees’ remit of knowledge, clarity in both delivery and content aided the audience in comprehending the specific topic separated into two parts, firstly aid (state and national aid) and then in regards to the free movement of persons. The presentation and discussion both centred round the stark difference in treatment concerning the treatment of both by the CJEU. Highlighted were the exceptional cases,[1] which seemed to be at odds with the prior line of reasoning. It was commendable to the speaker that though her topic was not widely understood before the day began, she certainly shed some light on the matter by the end of it. Ultimately again, the theme emerged of the divergence rife within the Union’s constitutional decisions. Her focus on this idea contextualised her area of expertise with that of the previous in term of the delicate balance required in both because of the EU’s constitutional nature.

The panel rounded off with a non-lawyer’s perspective on the hypocrisy in the EU’s motto in her take that it was more akin to being ‘United in diversity: the lesser of two evils’. As highlighted, to hear a fresh non-legal perspective of an idea of predominantly considered in the legal sphere was a welcome and indeed interesting debate. From a largely linguistic point of view, the notion of the diversity of languages and its consequences for the united Union was considered. The large number of both languages and cultures in the EU contribute to the difficulty in becoming such. This was due to the inherent connection between the two and the undesirability to have a lingua franca for the Union. It perpetuated the idea that there has been a failure to achieve equality, which means there is also legal certainty compromised. It seemed that there was an inevitable sphere of linguistic uncertainty. Again, identity was a key issue given that without an agreement as to one, there would constantly be a tension in the supranational order. Whilst there was significant criticism advanced as to the lack of a clear answer for why there is such hypocrisy and tension within the Union, it only served to emphasise again that this characteristic of the EU would be here to stay, and likely the source and subject of many a debate to come.

The second panel was an opportunity for one of the authors to dig deeper into a relevant debate, of which topics and presentations on offer didn’t disappoint. The EU has been epitomised in recent months as an unpredictable political playground. Solidarity and austerity are seen as two conflicting schools of thought, with a line being firmly drawn between the two. The solidarity of many countries has faltered under immense economic pressure. Germany’s resistance to guarantee funds to enable further bailouts and the UK’s proposed attempts at future renegotiations and referendums have spurred a culture of countries looking from the outside at the problems facing the EU from within. The term ‘austerity’ has become taboo to many EU citizens and only the most daring of us would ever utter these words in order to raise a debate. Luckily for us, the speakers were not worried by such a fear.

The first speaker was Luca Lionello, (Catholic University of Milan) with a presentation entitled ‘Austerity Measures, Shift of Sovereignty and Democratisation of European Institutions’. The title was intriguing given its boldness in tackling austerity and sovereignty in the same sentence. Aren’t these terms a modern day juxtaposition? The presentation dug deeper into the reality of austerity measures and the impact they have on country independence. He tackled the recent adoption of the Euro plus pact, the Six Pack and the Treaty on Fiscal Stability, as several EU members have adopted austerity measures to respect the new rules on fiscal integration. However, the question on everyone’s lips was; are these measures legitimate and can they solve anything? Luca raised three main points to question the legitimacy of the measures (1) as fiscal policy is a core competent of national sovereignty, the development of a strong European supervision on national budgets will probably oblige members states to reform their own constitution, (2) the new economic governance is managed by intergovernmental bodies that dont directly respond to the citizens in contradiction with the EU’s democratic principle and (3) the adoption of austerity measures under the new rules on fiscal integration has caused the violation in many member states of social and labour rights. The tone of the talk was hopeful that the way to remedy these illegitimacy’s was providing European institutions with the competence and the appropriate means to guarantee social protection of the EU according to the principle of subsidiary. However, with recent economic catastrophes, like that seen in Cyprus, it seems principle of subsidiarity may take a backseat on the EU agenda while we ride through the storm.

With subsidiarity at the forefront of the audiences mind, we were greeted by Pieter Van Cleynenbreugel, (University of Leuven) with a presentation entitled ‘Between Delegation and Attribution: Article 114 TFEU, Integrated Administration and the Constitutional Circumvention of the Meroni-judgement on the Establishment of new EU Regulatory Agencies’. The cynical tone of the speakers’ thoughts was presented by the notion that the Meroni judgment [2] is still repeatedly invoked to curb the regulatory powers of independent EU agencies. This powerful debate has been made even more relevant by the introduction of the institutional set up and decision-making powers of the new European Supervisory Authorities (ESA’s) in financial markets regulation. A decisional tug of war is ongoing at EU level between the Meroni delegation limits with the EU treaties’ competence attribution framework. It seems the EU has been rather inventive in delegating power as the incorporation allows it to partially circumvent traditional Meroni delegation limits and to re-qualify them as novel, thus enabling and restraining instruments governing the process of agency establishment in general rather than agency delegation in particular. After a discussion on the relevant case law and highlighting Articles 114 and 291 TFEU, the line of reasoning given by the EU was adamantly and persuasively criticised by the speaker, leaving many thinking, where do we go from here?

It was with bated breath that the audience waited for the last speaker on the Panel. Gianni Lo Schiavo (King’s College London) presented on ‘The European Financial Supervisors: A true constitutional challenge in the aftermath of the European Crisis’. This was clearly the hot topic of the panel with many audience members having prepared questions in advance for the speaker to answer. The speaker took a novel approach to his presentation and made a clear case for the introduction of the macroeconomic layer into the European economic constitution established by the Maastricht Treaty. The issues raised by the speaker covered not only the economic crisis but the underlying constitutional crisis as well. Whilst the new European Financial Supervisors were shown to be important improvements, Gianni spent no time getting to the harsh questions of these entities. The first problem was the shaky ground that these entities seem to have been built upon. The new European delegated governance is being shaped, but it is unclear whether their role will be enhanced as standalone bodies. Secondly, and importantly, the discussion turned to sovereignty; how do these bodies relate to national authorities and their powers, could this indicate a real ‘top down’ process of market regulation and control? The presentation ended stressing the urgency of the need for clear answers of effectiveness and shared responsibilities.

Both panels presented papers that prove themselves in both relevance and content. They raised significant issues, but more importantly current issues, and like with any conference by the end both authors found themselves with more questions than they started with as to the future of the EU’s plans in many aspects, on their direction in future development on fundamental rights, identity and that ever tricky balance between sovereignty and supranationality, and on economic recovery and the agencies that could aid in its implementation.

LL.M in European Law and Economic Analysis, College of Europe; BSc Economics and Finance, LSE; LLB, Université Paris 1 Panthéon-Sorbonne and Universidad Complutense of Madrid

Introduction

On 5 December 2012 a report signed by Mr. Van Rompuy (President of the European Council) in close collaboration with Mr. Barroso (President of the European Commission), Mr. Juncker (President of the Eurogroup) and Mr. Draghi (President of the European Central Bank) was issued, which outlined the steps to be adopted to tend towards a genuine Economic and Monetary Union (“EMU”).[1] The publication of this report marked the beginning of a new era for the EMU.

Shortly after, on 13 December 2012, the Council of the European Union agreed on its position on two proposals aiming at establishing a single supervisory mechanism (“SSM”) for the oversight of credit institutions. The first was a Proposal for a Council Regulation conferring specific tasks on the European Central Bank (“ECB”) concerning policies relating to the prudential supervision of credit institutions.[2] The second proposal aimed at amending the existing Regulation establishing the European Banking Authority (“EBA”).[3] This has been seen as a landmark event in the European construction and Commissioner Barnier has even gone as far as qualifying this as an “historical agreement”.[4]

The intention was to have the package voted by the European Parliament by the end of 2012 or beginning of 2013. For a series of reasons – of which some are more legitimate than others[5] – this vote has been delayed. It is however interesting to analyse at this point in time what the content of the proposal is and some questions which come to mind when reading the proposal, in the hope that some – if not all – will be answered by the time the final texts are adopted.

The content of the proposal in a nutshell

The purpose of the proposal is to establish a SSM, thereby:

“[conferring] on the ECB specific tasks concerning policies relating to the prudential supervision of credit institutions, with a view to contributing to the safety and soundness of credit institutions and the stability of the financial system within the EU and each Member State, with due regard for the unity and integrity of the internal market”.[6]

The ECB is expected to assume its supervisory tasks on 1 March 2014 or 12 months after the entry into force of the legislation, whichever is later.[7]

The main criteria for a financial institutions to fall under the ECB’s supervision is thus that it is systemic or, as the proposal states, that it is “significant”. The assessment of the significance of financial institutions is carried out on the basis of three criteria: (i) size; (ii) importance for the economy of the EU or any participating Member State; and (iii) significance of cross-border activities.

On the basis of these criteria, a financial institution is thus considered significant if the total value of its assets exceeds €30 billion, if the ratio of its total assets over the GDP of the participating Member State of establishment exceeds 20% (unless the total value of its assets is below €5 billion), or if the national competent authority considers that the institution is of significant relevance and the ECB confirms this following an extensive assessment. Furthermore, financial institutions which have requested or received public financial assistance directly from the European Financial Stability Facility (“EFSF”) or the European Stability Mechanism (“ESM”) cannot be considered less significant.[8]

It is expected that around 150 credit institutions will fulfil these alternative conditions and will thus fall under the prudential supervision of the ECB.[9] However, although 150 might sound like a large number, there are two very notorious categories of credit institutions which are clearly missing.

The first one is that composed by the credit institutions of the City in London. The reason underlying this exclusion is that the UK (together with Sweden and the Czech Republic) has managed to keep its own credit institutions aside from this proposal. The second category is that composed by the Sparkassen, the German local savings banks, which escape the ECB’s prudential supervision given that Germany managed to negotiate thresholds sufficiently high for these savings banks to fall out.

The proposals also states that:

“[on 29 June 2012] the Euro area Heads of State or Government Summit pointed out that when an effective single supervisory mechanism is established involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalise banks directly which would rely on appropriate conditionality, including compliance with state aid rules”.[10]

Although this idea is only contained in a small paragraph within a 73-page document, its importance is clearly inversely proportional to its size. Although the direct recapitalisation of banks by the ESM is not yet a reality as it requires a decision of the Council to become operational, if it is finally adopted it will have a great impact on Member States’ public finances.

Amongst other reasons, one of the advantage of this system over the current system whereby the ESFS/ESM facilitate the funds to national treasuries which subsequently recapitalise national banks themselves is that the funds being transferred to banks will not come to increase Member State’s debt-to-GDP ratio as the funds will be perceived as coming from a different legal entity, the ESM. This is a very important fact as it will allow cutting the existing vicious circle between sovereigns and banks, something which has greatly contributed to the debt crisis in Europe.

Some unanswered questions concerning the proposals

It is undeniable that the Council’s proposals constitute a giant’s step towards a genuine EMU given the extensive powers which are granted to the single banking supervisor. However, the text of the proposal and the various press releases and press conferences that have accompanied it cannot clarify some unknowns which come to mind when reading the proposals. Some of the most flagrant ones are:

Why is it to be expected that the ECB will carry out a more precise and careful prudential supervision of systemic banks than national central banks currently do? At the end of the day, it seems that staff from national central banks is going to be transferred to Frankfurt, which entails that it will most likely be the same people carrying out the supervision of the same credit institutions, but simply from a different geographical location.

Is the “two-speed” supervision that the proposals are establishing desirable for the European credit sector itself? It is not difficult to imagine a situation where clients, considering that their interests are better protected when the supervision is carried out by the ECB than by national central banks, will transfer their savings to systemic institutions, leading to the disappearance of smaller credit institutions, thereby leading to a higher market concentration, which can have pernicious competition effects.

What implications will this have for the IMF and its financial intervention in Eurozone countries? Will the IMF be entitled to give instructions to the ECB on how to conduct its prudential supervision as it current does to national central banks having received financial assistance from the IMF? A well-thought answer is to be provided to this question if we do not want to see muddy relations within the Troika.

Although the proposals foresee a common backstop loss mechanism (the ESM), why does it not contain a common “safety net” for depositors, which is equally important and necessary for a genuine EMU to exist?[11] There won’t be a fully-fledged EMU until such mechanism is put in place in the EU.

When bank recapitalisations are carried out by Member States, State aid rules apply. But what will apply when the recapitalisation is done directly by the ESM? Wouldn’t there be a conflict of interest between the ESM’s underlying goal of maximising the returns on its loans and the purpose of State aid rules of limiting distortions on competition? It is to be expected that it will be broadly in line with the rules contained in Articles 107 and 108 TFEU but, what if it doesn’t? Could such decisions be challenged before the Court of Justice?

Conclusion

The two proposals of the Council are certainly to be seen as a giant’s step towards a genuine EMU as the SSM is undoubtedly a central instrument of any decent monetary union. However, and although many unresolved questions arise, there are two main things which are to be regretted: first, that not all Member States subscribed to this initiative (thereby further fostering a two-speed EU) and, second, that the proposal does not cover all the necessary instruments for a fully-fledged monetary union to exist (in particular, the common safety net for depositors is clearly missing[12]). We are therefore facing another clear example of what Robert Schuman had in mind when proclaiming that “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements (…)”.[13] The EMU is therefore no exception to this sequential nature of the EU construction, which needs to take another giant’s step to get to a truly genuine EMU.

[3] Proposal for a Regulation of the European Parliament and the Council amending Regulation (EC) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards its interaction with Council Regulation (EU) No…/… conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions: http://register.consilium.europa.eu/pdf/en/12/st17/st17813.en12.pdf

[5] Some of the most important reasons lying behind the delay in the vote of the proposal include the uncertainty surrounding the elections in Italy, the recapitalisation of Spanish banks and, more recently, Cyprus’ bailout.

[6] See Article 1, paragraph 1 of the Proposal for a Council Regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

[7] See Article 27, paragraph 2 of the Proposal for a Council Regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions. However, given that the vote of the text by the European Parliament has not yet taken place, it is unlikely that the entry into force will occur before April or May 2014.

[8] See Article 5, paragraph 4, (a) and (b) of the Proposal for a Council Regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

[9]A fortiori, all other credit institutions remain under the supervision of their respective national central banks.

[10] See whereas number 8 of the Proposal for a Council Regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.

[11] The system currently in place obliges Member States to guarantee individually €100.000 per depositor and per entity in case of bankruptcy of the credit institutions where funds were deposited.

[12] There is currently a proposal on the harmonisation of national deposit guarantee schemes, which includes provisions to ensure that sufficiently robust national deposit insurance systems are set up in each Member State. However, even if the report entitled “Towards a genuine economic and monetary union” states that “a rapid adoption of this proposal is important”, it is not clear when this proposal will be adopted, although it seems highly unlikely that its adoption will take place before June 2013.

LLB Law and European Studies graduate from the University of Portsmouth

In its practice exceeding more than fifty years, the Court of Justice of the European Union (CJEU) has developed several seminal legal principles with an aim to ensure a uniform and consistent application of the EU Treaties.[i] Guaranteeing smooth interpretation and application of EU law is not only an aspiration, but also the CJEU’s duty established under Article 19 of the Treaty on European Union (TEU).[ii] This article seeks to provide a general overview of the principle of effective judicial protection. It aims to outline the role of the EU and national bodies which can advise on EU citizens’ rights in cases of misapplication of Union law. Further, the article will appraise how the seminal principles developed by the CJEU enabled individuals to obtain remedies in their national courts.

Effective judicial protection can be interpreted in a three-stage process. The first stage concentrates on the question if the EU citizens are aware of their rights. The second stage is defined with the concept of access to justice. The final stage is focused on the effective co-operation between the national courts of the Member States and the CJEU and enforcement of the decisions of the national courts.

I. Awareness of the protection of EU citizens’ rights

Protecting the rights of EU citizens and ensuring that the objectives of the concept of European citizenship are observed is a necessity. Although the 1957 EEC Treaty[iii] was silent on the protection of fundamental rights and European citizenship, from the 1970s onwards many initiatives have been put forward in order to establish a “Europe for Citizens”.[iv]

In the current Treaty framework, European citizenship and its objectives are defined in Art.20 TFEU[v] which identifies and accentuates the advantages of being an EU citizen. European citizenship provides us with many benefits: the rights to move, work and reside within the Union; right to study in another Member State; the right to vote in the European Parliament elections in the country where you reside and the right to receive protection from another EU Member State in the country you are visiting if your country of origin is not represented.[vi]

In 1975, Belgian Prime Minister Tindemans clearly enunciated that ‘[n]o one wants to see a technocratic Europe. European Union must be experienced by the citizen in his daily life.’[vii] Thus, if the EU seeks to fulfil its aspiration to create ‘an ever closer Union among the peoples of Europe’, it needs to place the citizen at the heart of its decision making.

The 2010 Eurobarometer survey[viii] revealed that the majority of the EU citizens were unaware of their rights granted by the EU.[ix] The purpose of the European Citizenship Report 2010[x] was to identify the obstacles to EU citizens’ rights and suggest practical solutions in order to overcome the problems that EU citizens might encounter. The outcome of the consultations was the launch of a website called ‘Your Europe’. The web page provides practical information about Union citizens’ rights and about national rules and procedures from which the Union citizens can benefit. Another proposal in line with the European Year of Citizens 2013 includes the organisation and promotion of events on EU citizenship and citizens-related policies which will potentially increase the civic involvement and thus strengthen citizens’ awareness of their EU citizenship status.

II. Access to justice: the role of EU and national bodies

Once EU citizens are aware of their rights, the second fundamental point which needs to be considered is which institutions or bodies can advise EU citizens on their rights? As the 2012 Eurobarometer survey[xi] revealed, the EU citizens need more information about where to turn in cases of violation of their EU rights.

On 6 December 2012, the Fundamental Rights conference was held in Brussels. The topic of the conference was access to justice and the speakers stressed that it is a fundamental matter as it not only ensures the democratic governance within the EU, but also ‘gives practical effect to the foundation stone of the rule of law on which the Union is built’.[xii]

Commissioner Reding in her speech in this conference[xiii] acknowledged that 21% of the EU citizens will turn to their national courts in cases of violation of their Charter rights and 20% will bring their case before the Ombudsman. What is surprising is that EU citizens are still unaware of the role of EU bodies such as SOLVIT or Europe Direct. This suggests that citizens require additional information about the role of EU bodies that can provide legal advice and aid. This can be achieved through co-operation with national media. The roles of national media are not only to inform us about the debates in our nation states, but also to educate us. The launch of a successful partnership with national media of the Member States could have huge benefits. The most valuable contribution would be that the EU could reduce the mistrust between itself and the EU citizens. Once citizens have an objective opinion about the benefits of EU membership then there will be also a decrease in the eurosceptic attitudes in the Member States.

III. National courts of the Member States and the CJEU and effective enforcement of the national courts’ decisions

As noted earlier, the national courts seems to be the first place where the EU citizens will turn if they encounter misapplication of Union law. Thus, in theory if effective judicial protection exists in the EU, it can also be described as a result of an effective relationship between the CJEU and the national courts of the Member States. This relationship should be based on sincere co-operation and mutual respect as demonstrated by Art.4(3) TEU.[xiv] Maintaining effective relationship between the national courts and the CJEU is vital as in procedural terms individuals do not have the right to appeal to the CJEU. It is the national courts or tribunals of the Member States which have the discretion under Art.267 TFEU[xv] to decide whether or not to refer questions to the CJEU.

For example, the wording of paragraph 2 of Art.267 TFEU states that national courts, which are not the last instance in certain case, ‘may’ refer the question related to interpretation of EU law to the CJEU. This demonstrates that it is solely for the national courts to decide whether or not refer questions to the CJEU. This position is reaffirmed if the Court’s reasoning in CILFIT is taken into account where the Court stated that ‘in all circumstances national courts and tribunals (…) remain entirely at liberty to bring a matter before the Court of Justice if they consider it appropriate to do so’.[xvi] The national courts are enabled to use their discretionary powers not to refer to the CJEU if such question of law was irrelevant or was previously interpreted or when the doctrine of acte clair applies.

Entrusting the national courts of the Member States with such powers is an indication of a mature relationship between the national courts and CJEU. The potential positive outcome of such relationship means that straightforward cases are decided at national level by the national courts and the CJEU has more time to resolve more problematic cases. [xvii]

However, Article 267 TFEU makes a clear distinction between discretionary and mandatory references. For example, the Lyckeskog [xviii] judgment of the CJEU underlined that if a question concerning the interpretation of Union law arose before a court of last resort, it would be under an obligation to request a preliminary ruling in accordance with Art.267 TFEU, either when analysing admissibility or at a later stage. This position was reiterated in the Köbler[xix] case where the CJEU held that non-compliance by a top national court with its obligations under Art.267(3) might render the state in which it is situated liable in damages to an individual who was in that way deprived of his rights under EU law.

One should note, that the relationship between the CJEU and the national court in proceedings under Art.267 TFEU is co-operative rather than hierarchical in nature. Both courts have distinct but complementary roles to play in finding a solution to the case which is to be solved in accordance with EU law. A reference to the CJEU is not an appeal against the decision of the national court. The CJEU does not rule on the application of the law to the facts or the compatibility of national law with the requirements of EU law. These are matters within the exclusive jurisdiction of the national court.

It is also the national courts of the Member States which will award remedies to individuals. Nevertheless, from the early 1990s onwards the Court has requested adequacy and effectiveness in the award of remedies in the domestic enforcement of Union law. As De Burca notes, national courts are required to undertake a case-by-case review of the national rules and disapply any restrictive national provisions whenever necessary in order to award adequate and effective remedies in the spirit of EU law. [xx] This is primarily because national remedies must secure the effectiveness of EU rights.[xxi]

IV. Conclusion

Effective judicial protection is a fundamental right of EU citizens and, as a result, EU citizens must be aware of their fundamental rights so that they can understand in practice the benefits of their EU citizenship status. Thus it is suggested that the efforts of the EU in the European Year of Citizens 2013 should be primarily focused on educating and informing citizens about their rights and providing information about EU legal advice and aid centres. These are the two fundamental points which will ensure that effective judicial protection finds its place not only in theory, but also in practice.

[i] Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union [2010] OJ C 83/1.

[ii] Consolidated version of the Treaty on European Union [2010] OJ C 83/1.

[ix] Although the majority (79%) of EU citizens claim familiarity with the term “citizen of the European Union”, only 43% say they know its meaning and less than one-third (32%) of respondents from the 27 EU countries consider themselves well informed about their rights as citizens of the European Union.

]]>http://kslr.org.uk/blogs/europeanlaw/2013/04/08/effective-judicial-protection-in-the-european-year-of-citizens-2013/feed/0Radu judgment: A lost opportunity and a story of how the mutual trust obsession shelved human rightshttp://kslr.org.uk/blogs/europeanlaw/2013/03/27/radu-judgment-a-lost-opportunity-and-a-story-of-how-the-mutual-trust-obsession-shelved-human-rights/
http://kslr.org.uk/blogs/europeanlaw/2013/03/27/radu-judgment-a-lost-opportunity-and-a-story-of-how-the-mutual-trust-obsession-shelved-human-rights/#commentsWed, 27 Mar 2013 09:59:01 +0000editorhttp://kslr.org.uk/blogs/europeanlaw/?p=416Ermioni Xanthopoulou

PhD Candidate, King’s College London

On 29th January 2013, the Court of Justice of the European Union (CJEU) delivered its judgment in the Radu case.[i] In this case the Court was asked to interpret the Framework Decision on the European Arrest Warrant (FDEAW) through the prism of the Charter of Fundamental Right of the European Union (the Charter) and the European Convention of Human Rights (ECHR).

While this judgment was expected to open the door to a more human rights-enshrined interpretation of the European Arrest Warrant (EAW), the Court seems to have skipped this chance.

European Arrest Warrant basics

The EAW is the first EU criminal law instrument based on the principle of mutual recognition, the so-called cornerstone of European Criminal Law. Having provoked constitutional concerns for abolishing the requirement of double criminality for a list of offences, after ten years it is still here accompanied by the never-ending debate.

The EAW is in fact a judicial decision, issued by the judicial authorities of one Member State (MS), requesting the arrest and surrender of a person from the judicial authorities of another MS for the purposes of (a) conducting a criminal prosecution (b) executing a custodial sentence or (c) detention order. It replaced a slow and politicised mechanism of interstate cooperation in view of the need of faster extradition in the EU internal market. This mechanism is based on the assumption of advanced confidence between the Member States.

Therefore, the state executing the EAW is under the obligation to arrest the wanted person and surrender him to the issuing state, except where the grounds for refusal listed in the FDEAW exists. What usually strikes lawyers is that there is no specific ground for refusal for human rights violations by the issuing authority, which gives no choice to the executing authority but to arrest and surrender the requested person even in the case that the act he committed does not constitute an offence in the executing state and even if his fundamental rights were not observed by the issuing state or there is a high risk of them being violated in view of the bad human rights protection record of this state.

Hence, a new argument has emerged in the light of the de-pillarisation of EU criminal law after the Lisbon Treaty and after the binding effect was given to the Charter. This new argument attempts to establish that the interpretation of the FDEAW should be enriched by the respect for fundamental rights as illustrated by the Charter. Also, the Commission in its latest implementation report[ii] states that ‘the framework decision does not mandate surrender where an executing judicial authority is satisfied…that such surrender would result in breach of a requested person’s fundamental rights arising from unacceptable detention conditions’.

This view is further supported considering the recent N.S. judgment of the CJEU. This case concerns the EU asylum system which is also based on the same principle of mutual recognition as the EU extradition system. The Court ruled that the Member states may not transfer an asylum seeker to the Member State responsible, where they cannot be unaware that systemic deficiencies in the asylum procedure and in the reception conditions amount to substantial grounds for believing that the asylum seeker would face a real risk of being subjected to inhuman or degrading treatment.

Facts of Radu

So, in our story, Mr Radu was a Romanian national, subject to four arrest warrants, issued by the German judicial authority for the purpose of conducting criminal prosecutions in respect of acts of robbery. As he did not consent to his surrender, he claimed that the contested warrants were issued without him having been summoned or having had a possibility of hiring a lawyer or presenting his defense, in breach of Articles 47 and 48 of the Charter and Article 6 of the ECHR.

He argued that the FDEAW and the law implementing it should be interpreted in view of the provisions of both the Charter and of the ECHR. If the judicial authorities of the executing Member State discovered that the fundamental rights were not observed by the issuing authorities, they would be justified in refusing to execute the EAW concerned, even if FDEAW does not expressly provide for that ground for non-execution.

In a nutshell, the questions raised highlight three main issues. Firstly, they involve the different interpretation of the FDEAW in light of the Treaty of Lisbon and the Article 6 TEU and question whether the Charter and the ECHR form part of the primary EU law. Secondly, the questions concern the issue of deprivation of liberty of the requested person, as part of the procedure leading to the execution of the EAW. Since it interferes with the right to liberty and security of a person (Article 6 Charter and Article 5 ECHR read in conjunction with Articles 48 and 52 Charter) the CJEU was asked whether if this is actually necessary and proportionate to the objective pursued in a democratic society. Thirdly, they ask whether, through the prism of this new interpretation, the executing judicial authority can refuse to execute the EAW in the event of breaches of human rights legislation.

Opinion of Advocate General

The Advocate General Sharpston in her well reasoned opinion[iii] interestingly claimed with regard to the first issue that rights emanating from the Charter constitute part of the primary EU law, while the rights originating from the ECHR constitute general principles of EU law.

In respect of the second issue, the Advocate General argued that the deprivation of liberty and the forcible surrender of the person, following the execution of the EAW, especially issued for the purpose of criminal prosecutions, constitute interference with the person’s right to liberty as it is safeguarded by the Article 5 ECHR and Article 6 Charter. For this reason, it should not be arbitrary. The factors which should be taken account include the good faith in which the detention should be performed, the fact that it should be interrelated to the ground of the detention (suitability and effectiveness), the place should be appropriate and the length reasonable (necessity and least restrictive measure test).

With reference to the third point, the Advocate General Sharpston argued that the executing judicial authority could refuse to execute a warrant, when it is demonstrated that the rights of the requested person have been infringed or will be infringed and, in the current case with regard to Articles 6, 47 and 48 Charter, the infringement should be such fundamental that would destroy the fairness of the process.

Judgment

The judgment did not follow the structure of the questions or the conceptual structure given by the Advocate General, confusing its reader despite its short length. However, this is the least, considering that it limited the scope of the preliminary reference and that certain questions remained unanswered.

The CJEU appeared to accept that the Charter constitutes primary law but, according to the Court, the observance of rights enshrined in Articles 47 and 48 of the Charter does not require that the executing authority could refuse the execution of the EAW (Para 39). The Court attempted to clarify in advance that the Radu case related to an EAW issued for the purpose of conducting criminal prosecutions and not for the execution of a custodial sentence (Para 28). Then, it reiterated that the EAW was adopted so that it would simplify the extradition and for its operation which is based on the principle of mutual recognition, states should have mutual trust. Therefore, states cannot flee from an EAW request (Para 33-35).

With respect to grounds of refusal it remained loyal to the letter of the instrument. It left no space for any interpretation enlightened by the Charter sun or even by the Article 1(3) of the Framework Decision on EAW, read in conjunction with Article 6 TEU and the corresponding Charter provisions. Moreover, in an attempt to deepen this view and further justify it, it claimed that if the person was to be heard before the issuing authority, this would inevitably affect the effectiveness of the instrument. This is because the EAW is based on surprising the wanted person so that he could not catch a flight and flee (!) (Para 41). Finally, pursuant to the Court there is always the executing authority to hear the requested person.

Regarding the issue of whether the deprivation of the person’s liberty accompanying the process of arrest interferes disproportionately with the right to liberty and security, the Court just ruled that it is related to the debate on the defense rights. Thus the Court claimed that the issue does not necessitate special attention, tackling the request to address the breach of those articles (Para 30).

Therefore, in contrast to the opinion of Advocate General Sharpston, according to the Court the FDEAW should be interpreted in such a way so as not to allow the executing authority to refuse the execution of a EAW issued for the purpose of criminal prosecution on the ground of violation of the requested person’s right to be heard.

Comment

The Radu judgment surprised EU criminal lawyers anticipating the post-Lisbon effect on the interpretation of the EAW for its minimalistic and narrow approach. It was an unexpectedly short judgment given the number and the significance of the questions. The Court avoided the substance of the burning issues and narrowed down the scope of the references, causing further questions.

Firstly, it should be noted that the judgment contradicted the Advocate General opinion and the previous CJEU ruling in N.S. case, where it had clarified that the EU asylum system cannot operate on the basis of a “conclusive presumption” that all EU Member States “observe the fundamental rights of the European Union” (Para. 105). In Radu, the Court, based on this conclusive presumption, repeated the need and the obligation of Member States to have mutual trust to each other, in contrast to the abovementioned N.S. judgment. One would wonder here, whether the fact that the issuing state was Germany in this case facilitated the Court to follow this ruling and whether it would have adjudicated differently if the issuing country was one of the so-called ‘non-safe countries’.

The first paragraph of the Court is also noteworthy, since the Court stated that the warrant was issued for the purpose of a prosecution and not for the execution of a custodial sentence. This triggers the question whether the ruling would be different if this was the case of an EAW issued for the execution of a custodial sentenceand Mr Radu was requested for this purpose? Would the Court have defied the mutual trust obsession?

Moreover, the Court, after exposing the reasons leading to the adoption of the EAW, argued that if the issuing authority would be required to hear the requested person, this would lead to the failure of the system. The framework decision’s preamble articulates that the extradition procedures should be speeded up in respect of persons suspected of having committed an offence and trying to escape from justice. This is why the system’s key method is to surprise the requested person so as not to allow the possibility of run away (Paras 40, 41). This reasoning, realistic as it may sound in a Europe without internal borders, lacks the most principal constitutional ground. The principle of presumption of innocence, as enshrined in the Article 48 of the Charter and 6(2) ECHR, pronounces that ‘everyone who has been charged shall be presumed innocent until proved guilty according to law’. Isn’t surprising a suspect with the aim of arresting him, then surrendering him to another Member State in order to prosecute him, without any hearing at odds with the presumption of innocence?

The Court’s response was that the person can be heard by the executing judicial authorities. Someone would wonder at this point which the options of the judicial authorities really are, as the Court previously ruled that the states cannot flee from the EAW mechanism which does not provide a ground for refusal for human rights violations (Para 41) So, the scope of the person’s right to be heard is really limited to this point.

Finally, a question of constitutional importance was submitted which finally remained unanswered. The Court skipped the question on whether

the interference on the part of the State executing a EAW with the rights and guarantees laid down in Article 5(1) of the [ECHR] and in Article 6 of the [Charter] (:right to liberty), read in conjunction with Articles 48 (:presumption of innocence) and 52 thereof, with reference also to Article 5(3) and (4) and Article 6(2) and (3) of the [ECHR] (:fair trials rights), satisfy the requirements of necessity in a democratic society and of proportionality in relation to the objective actually pursued.

This could have been a chance for the Court to throw light on the ill-defined constitutional principle of proportionality in relation to the objective actually pursued through legislation in the context of European criminal law.

Due to those remaining question marks, the judgment was surprising and somewhat disappointing. Trying to explain the mystery of this analysis, we could hypothesize that the Court might have been aware of the domino effect of a different ruling on the principle of mutual recognition, the foundation of the whole mechanism. This effect, given the lack of a clearly delineated ground for refusal for the execution of EAW in the event of human rights breaches, could be an open-ended one, especially if there is no political will to reform the measure soon.

[ii] Report from the Commission to the European Parliament and the Council, On the implementation since 2007 of the Council Framework Decision of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States, Brussels, 11.4.2011 COM(2011) 175 final